Israel’s scandal-hit PM Olmert resigns

JERUSALEM (AFP) – Israel’s scandal-tainted Prime Minister Ehud Olmert resigned on Sunday, setting the stage for weeks of more political turmoil as the horse-trading begins to form a new government.

Olmert , who is battling a swathe of corruption allegations, handed a brief letter to President Shimon Peres announcing that “in line with his commitments, he is submitting his resignation,” the president’s office said.

Peres, who now has a week to designate a party leader to form the next government, paid tribute to Olmert for his work during his 32 months in power “for the people and the state of Israel.”

Foreign Minister Tzipi Livni, who replaced Olmert as head of the centrist Kadima party in a leadership vote on Wednesday, is hoping to become only the second woman prime minister in the nation’s history.

Olmert’s move initiates what could be a months-long process to form a new government, casting a shadow over peace talks with the Palestinians and further denting hopes of a deal by the end of this year.

Peres held talks with Kadima members on Sunday and is due to meet with other factions to decide who to task with the job of forming a new administration before he heads to New York for the UN General Assembly on Monday.

But in the rough and tumble of shifting allegiances in the Israeli political scene, Livni has no guarantee she will be able to come up with the numbers to form a coalition government and avoid an early election.

The 62-year-old Olmert, who stays on as interim premier until a new government is formed, had first announced on July 30 he would step down to battle a number of corruption allegations.

Police have recommended criminal charges against him in two cases where he is accused of accepting large sums of cash from a US financier and multiple-billing foreign trips.

He has denied any wrongdoing.

Peres is expected to give Livni 42 days to form a government and try to prevent a snap general election, which opinion polls indicate would bring the right-wing Likud party headed by former premier Benjamin Netanyahu to power.

The Kadima leadership result confirmed Livni’s meteoric rise to become the most powerful woman in Israel, and could now see her follow in the footsteps of Golda Meir, the country’s first woman prime minister.

But the turmoil unleashed by the allegations dogging Olmert also threatens to derail the US-backed peace talks with the Palestinians that were formally relaunched last November but have made little tangible progress since.

As foreign minister Livni , a 50-year-old lawyer and former Mossad spy, is the lead negotiator for Israel in the talks.

Both sides remain deeply divided on core issues, however, including final borders, Jewish settlements in the West Bank, the future status of Jerusalem and the fate of some 4.6 million Palestinian refugees.

The negotiations could complicate Livni’s efforts to form a new coalition, with the ultra-Orthodox Shas Party — a key partner in Olmert’s administration — vowing to quit if Jerusalem is even discussed.

“No one, not even Olmert, has any political or moral authority to push any controversial decisions right now,” Shas chairman Eli Yishai said, according to the Ynet news service.

The Palestinians want mostly Arab east Jerusalem, which Israel seized in the 1967 Six Day War, as the capital of their future state.

Israel, however, considers the entire city to be its “eternal, undivided” capital, a claim not recognised by the international community.

Labour party head and defence minister Ehud Barak — another key member of Olmert’s coalition — met Netanyahu over the weekend, with local media speculating about an emerging anti-Livni alliance.

“In view of the political, financial and security challenges we face, what Israel needs now is a national emergency government,” Barak said.

Netanyahu — considered a hardliner in the peace talks — wants the country to go to the polls and is is tipped as the likely winner, but Barak has not yet adopted a clear position.